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South Korea to seek labour law revision to clarify wage dispute cases

[SEOUL] South Korea's finance minister on Friday said the government will seek to revise the labour law to clarify whether regular bonuses should be counted as part of a base pay for workers, in the wake of a landmark ruling against Kia Motors.

On Thursday, a court ordered Kia Motors to pay 1 trillion won (S$1.2 billion) to its workers in unpaid wages, giving encouragement to unions engaged in hundreds of similar disputes against employers across the country.

"For a more fundamental solution to this (wage dispute) problem, the government plans to amend the labour law so that the legal range of wages could clearly be defined," Kim Dong Yeon told other policy ministers at a policy meeting.

Unions are demanding that regular bonuses should be included in calculations of other salary-linked allowances such as pension and overtime pay, as the current labour law does not stipulate how variable bonuses should be calculated in the overall wage.

Including regular bonuses, such as annual vacation allowances, in the base wage would boost South Korean companies'wage bill as it would inflate all other salary-linked costs.

After the court ruling, Kia Motors said it expects the additional payout for wages to result in the company posting a third-quarter operating loss, and that it potentially faced a bigger financial burden once all its workers' wages were adjusted.